a | r | e March/April 2009

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We Support AREAA And REALTORS® In Helping Homebuyers Realize The Rewards Of Homeownership As a REALTOR®, understanding the complex purchase market and working with the right lender can go a long way toward building your bottom line. That’s where we come in! You can feel confident knowing Wells Fargo Home Mortgage has the strength and stability of a well-established lender. With our value-added programs and services, including FHA home financing, you can help make your homebuyers’ goals a reality.

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MARCH

/ APRIL 2009 1, NUMBER 3

VOLUME

F EATURES 14

The Crumbling American Dream BY SCOTT HOOVER Will President Obama and the new administration be able to stop the carnage?

14 20

Stopping Foreclosures BY SCOTT HOOVER

22

Fixing the Problem BY SCOTT HOOVER AREAA members offer their advice regarding the housing crisis facing the U.S.

24

Tightened Mortgage Spending BY BRIAN CHUNG

25

Bridges to Homeownership BY KIMBERLY PARK

28

Credit Repair BY BRIAN C. ABER Do it yourself or hire a credit restoration company?

30

AREAA 2009 Policy Goals

32

Condo-Hotels Booming with Potential BY LARRY COHEN Hot Trend in Vacation Homes Appeals to Baby Boomers

36

28

Networking 101 BY ED CRAIN AND DR. IVAN MISNER Knowing What Not To Do

40

(Re) Introducing PAM BY PAUL IMURA A proven method of helping all borrowers meet down payment requirements

42

Here to Help BY SCOTT HOOVER Wells Fargo continues to strengthen minority partnerships

46

46

Eleven Keys to Getting Your Short Sale Sone BY CHIP CUMMINGS

48

11 Keys to Getting Your Short Sale Done BY CHIP CUMMINGS, CMC

52

Capital Times: AREAA in Washington D.C. BY SCOTT HOOVER

D EPARTMENTS

52

2

4

ON THE COVER Allen Chiang in Washington D.C.

CORRECTION: Last month A/R/E failed to mention that Photographer David Ng should be credited The Challenges Ahead with all the convention photos within the January/February issue of A/R/E. We apologize Economist Outlook for this oversight.

Understanding Today’s Economy — By Dr. Tucker Adams

Editor’s Letter

March / April Advertisers Bank of America Mortgage . . . .BC

Photography by Rodney Choice www.choicephotography.com

Prudential . . . . . . . . . . . . . . . . . . .7 Wells Fargo Home Mortgage . .IFC

Upcoming AREAA Events AREAA/NAHREP Real Estate and Marketing Conference . . .IBC

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EDITOR ’ S NOTE

are ASIAN

REAL

ESTATE

MARCH/ APRIL 2009 VOLUME 1 — NUMBER 3 Editor-in-Chief Creative Director

Jim J. Park Praveen K. Sharma

Publisher/Editorial Director Jon Ruzan Advertising Sales Manager Scott Hoover Editor Scott Hoover Production Manager/Art Director Debbie Maxwell Financial Controller Kim Gallaher Editorial & Advertising Office Address A|R|E: Asian Real Estate Magazine c/o Banat Communications 23425 N. 39th Dr., #104-193, Glendale, AZ 85310 Tel (623) 516-2723 Fax (623) 516-7738 E-mail: jon@banatcommunications.com A|R|E Office Address (Membership Information) AREAA 5740 Fleet Street, Suite 155 Carlsbad, CA 92008 Tel 760-918-9162 Fax 760-918-6924 E-mail: contact@areaa.org Article Submissions/Press Material To submit any material including articles and press releases, please e-mail: scott@banatcommunications.com or mail to the Editorial Offices using the information above.

The Challenges Ahead Small businesses are an important engine for economic growth and prosperity in our economy and for our real estate industry. Yet, the challenges facing our economy and our real estate market are so unprecedented and deep rooted that it will likely take a historic engagement on part of the federal government to jump start and create lasting traction for the market overall. On the front pages of every newspaper or homepages of every online news outlet, you have seen the stories about record job loss, record foreclosures, companies going out of business and troubles in the stock market. What will it take to turn this situation around, especially for the real estate sector? And will the government function as the necessary

A|R|E is published by the Asian Real Estate Association of America (AREAA) for its members. Information concerning the contents can be obtained by directing correspondence to the Editor. AREAA is national professional trade organization dedicated to creating greater opportunities for homeownership in the Asian Pacific American Community. ©2008 by Asian Real Estate Association of America.

Reproduction in whole or part without permission is prohibited.

All rights reserved. Opinions expressed by individual authors are not necessarily the opinions held by AREAA.

stimulus to get the market moving again or will it overreach its role and

Article Reprints To order reprints of individual articles, please contact The Reprint Dept.

Tel: (717) 481-8500, fax: (717) 481-7677 or e-mail: wholliday@reprintdept.com.

estate decline and help to restore some needed order to the real estate

Asian Real Estate (ISSN#: PP1) is published bi-monthly for $35.70 for the Asian Real Estate Association of America

by Banat Communications, 23425 N. 39th Dr., #104-193, Glendale, AZ 85310.

Periodical Class Postage Pending Approval at Glendale, AZ and other mailing offices.

POSTMASTER: Please send address changes to: Banat Communications 23425 N. 39th Drive, #104-193 Glendale, AZ 85310

curtail innovation and prosperity in the future?

Clearly, the overall economic stimulus effort is critical to reigniting market activity and reviving the ailing economy. Additionally, pushing through a package of efforts to stave off foreclosures will slow down the real business. Whatever the solution is, it must fundamentally restore confidence in our housing system, particularly among future homebuyers. If our current real estate crisis continues, we may lose a whole generation of housing consumers who now believe that renting is better than owning, and they will stay on the sideline as the real estate market regains traction.

In this issue of ARE, we pose these and other questions to AREAA members and policy leaders. You will hear first-hand the kinds of ideas and

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a r e ASIAN

REAL

ESTATE

Your opportunity to link between U.S. And Asian real estate proposals our members believe will fundamentally change the course of our business. At AREAA, our focus will be to keep as many families in their homes through innovative loss mitigation solutions, including home retention efforts that are sensitive to the cultural and language needs of a more

A|R|E magazine brings together the

diverse homeowner population. Additionally, our community has been hit

broad Asian American marketplace

hard by the tightening of mortgage credit. This is especially critical to the

in the U.S. with Asian overseas

Asian American and immigrant markets where there are high small business ownership and self-employment levels. Our community has traditionally relied heavily on stated products and flexible underwriting to obtain home financing. These products are unlikely to be widely available in the market

real estate interests in a high-end real estate business and lifestyle magazine.

for years to come. So, the question is: How will deserving consumers with demonstrated ability to repay their financial obligation but with nontraditional income patterns get mortgage credit?

No doubt, there is not a silver bullet to these problems. But one thing is clear: the housing market will not fundamentally turn around until consumers are able to finance homes. We encourage everyone to get engaged in this debate. The future of our business and the stability of our neighborhoods depend on it.

This unique publication is published by the Asian Real Estate Association of America (AREAA) for both its members and readers interested in this emerging marketplace.

Jim Park Editor-in-Chief A|R|E Magazine A Special Bimonthly Publication from the Asian Real Estate Association of America

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ECONOMIST OUTLOOK

Understanding Today’s Economy

BY DR. TUCKER ADAMS PRESIDENT OF THE ADAMS GROUP, INC.

In times

of economic stress, whether it is a bust or a boom, there is a great temptation

to pay attention to the wrong things, to project short-term trends as though they are the new norm. In 30 years of economic analysis and forecasting, I’ve developed some rules that help me step back and look at the economic fundamentals. Now that I am moving toward the end of my career, it is time to share them with the rest of you.

MARCH / APRIL 2009

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1

Rule Number 1: Pigs don’t fly, but the chickens come home to roost.

Years ago, I was talking to a busi-

2

Rule Number 2: You can’t forever spend more than you make.

Debt is useful and, wisely used,

ness reporter at the USA Today. He proposed a

enhances a government’s ability to alleviate an

rather farfetched outcome to what was occur-

unexpected crisis, a business’ ability to grow, a

ring and asked me what I thought. My

household’s ability to consume. However, at

response was, “Well, pigs might fly.” It doesn’t

some point we must reduce spending, pay

take much imagination to figure out what

down the debt and live within our income.

quote the headline writer pounced on.

In the United States, we’ve been spending

To date, I haven’t seen a flying pig,

beyond our income for decades. Since 1961,

although I got them in every form from cookies

the Federal budget has been in balance only

to battery-operated toys on my birthday.

five times, in 1969 and for four years beginning

Actions have consequences, quite frequently

in 1998 at the end of the longest expansion in

predictable consequences. When we convince

the country’s history. For almost 50 years, we have elected politicians who raise spending and cut taxes, ignoring the long-term consequences,

At some point we must reduce spending, pay down the debt and live within our income.

and return them to office term after term, so we must like their performance. Prior to 1961, the budget was balanced over the business cycle with the exception of times of war. All of the Federal debt came from World Wars I and II, along with wars from the 19th century.

The advent of bank credit cards with the

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ourselves that the old laws no longer apply,

ability to revolve your balance at the end of the

that this time the pigs are flying, we are head-

month opened up the world of deficit spend-

ed for trouble. The chickens come home to

ing to consumers and we took to it with an

roost, sometimes accompanied by a black

unbridled enthusiasm. Today, the average

swan or two, and we have to live with the con-

household has 12 credit cards and only about

sequences of the decisions we made on the

37 percent of us pay the entire balance at the

basis of unrealistic expectations. That is pre-

end of the month. The consumer boom this

cisely what happened in financial markets in

created has been the underlying cause of eco-

2008.

nomic growth since 1980-82 recessions.

MARCH / APRIL 2009

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The overuse of financing by businesses led

tive (a stick rather than a carrot) for bankers to

to the dot com bubble of the late 1990s. Now

provide credit to people who can ill afford it.

everyone was in on the scam. Why wait for

So, we’ve bought too many homes, bigger

anything when you can have it now? If there

homes than we need and far more “things”

was one factor that made today’s recession

than we can afford. We did what we were paid

totally predictable, this was it.

to do.

Look at what happened in the financial

Rule Number 3:

world. Once the loan and distribute model

Incentives work.

replaced the old loan and hold model, people

People do what you pay them to

making the mortgages were given incentives

do. Most people work for money, a

by the fees they received — the more loans,

few for power, attention, an inner sense of sat-

the more fees. The financial institutions, now

isfaction, or some combination of them. So, be

that the loans were packaged and resold, did-

careful when you set up an incentive system,

n’t have to worry about repayment. Their prof-

because the behavior you reward is likely to be

its came from securitization, so the more loans

the behavior you get. Remember, pigs don’t

the better.

3 fly.

Tranching enabled the construction of What have we done in the United States?

products with various levels of risk suitable for

We give people an interest deduction when

different types of borrowers, allowing even the

they buy a home, which encourages more of

riskiest loans to be securitized. Rating agencies

us to have bigger mortgages and fewer of us

were paid to rate these structured products

to rent, boosting the home ownership rate to

and convinced themselves that these clever

almost 70 percent. We tax the interest on sav-

new packages were safer than the underlying

ing, contributing to the lowest saving rate in

loans.

the world. We tax dividends twice, encouraging business to replace equity with debt.

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Fund managers, motivated by bonuses paid on performance, sought out the tranch-

But, we allow an interest deduction on a

es with higher returns, bidding up the price

second mortgage or equity line, which encour-

and almost eliminating risk premiums. In June

ages us to use the equity in our homes for cars

2007, the risk premium between a CCC cor-

and vacations and the latest plasma TV screen.

porate security and a 10-year Treasury was

The Community Reinvestment Act is an incen-

only four percentage points, down from 23

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ECONOMIST OUTLOOK

percentage points in October 2002.

Of course, there was a bit of fraud out there. However, everyone did what he was paid to do and, as long as the system seemed

5

Rule Number 5: Prices are ultimately determined by supply and demand.

Where will interest rates be in 2009?

to be working, most people were happy with

Are oil prices going up or down? How low will

it. The pigs were flying!

home prices fall? These are the questions I’m bombarded with when I’m on the speech cir-

4

Rule Number 4:

cuit. The answer is, “I have no idea, and neither

There’s a big difference

does anyone else.” However, I do know that

between investment and

supply and demand will determine the

speculation.

answers.

An investment is a reasoned decision (not always a correct decision, of course) made with the realization that it may not pay off immediately and a plan to work though the problem.

Speculation is condoflip.com, where we could all sign onto the Internet in the morning, buy half a dozen condos in south Florida with

An investment is a reasoned decision made with the realization that it may not pay off immediately

almost no money down, and then flip them in a few weeks at great profit and no risk.

Everything was handled for us for a small fee.

The interest rate is the price of credit. The

It’s a wonder anyone bothered to go to the

huge supply of debt that will be issued to

office.

finance the $700 billion financial stabilization

By 2005, 28 percent of single-family homes

program along with the other stimulus pack-

were bought by people who didn’t plan to live

ages underway or to be enacted mean $1 to $2

in them, up from the long-term average of 10

trillion of new government securities. That

percent. The extra 18 percent had little or no

increase in supply, all other things being equal,

skin in the game and no plan of what to do if

would cause prices to fall and interest rates to

prices fell and the homes didn’t flip. Pigs were

rise.

flying, so there was no need to worry about those pesky details.

However, in an uncertain world, there is a flight to safety and nothing is safer than the

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obligations of the U.S. government. If that

economic sense for oil to soar to $150 a barrel

defaults, you’d better have all your assets in

and it makes no more sense that it fell by more

something you can eat or that will keep you

than 50 percent. It certainly doesn’t make

warm and dry. So, with both the demand and

sense for gasoline prices to fall by more than

supply curves shifting, the only forecast is one

the price of the underlying raw material. Once

I borrowed long ago from my mentor, Doris

again, both supply and demand curves are

Drury. “Rates will go up, then down, but not

moving — in this case most likely being

necessarily in that order.”

manipulated — but they are still determining

Pricing oil is equally difficult. Over the

price.

longer term, oil prices will rise. There is unlikely to be much increase in supply, while

The four most dangerous words in economic analysis are, “This time it’s different.”

6

Rule Number 6: Home economics don’t always behave rationally.

One of the basic premises of eco-

nomic theory is that individuals behave rationally — they take all of the available information, analyze it and then act appropriately.

Unfortunately, even when we have good information, we don’t always use it.

For example, we know perfectly well that

demand will inevitably rise. The 1.3 billion

we should avoid sweets and exercise every

Chinese use about 1/30 of the energy per capi-

day, yet a huge percentage of us are over-

ta that we do in the United States. As industri-

weight — heart attacks waiting to happen.

alized economies become wealthier, energy

We’re too busy to work out in the morning, we

consumption soars. It boggles the mind to

grab a hamburger and fries for lunch, we snack

imagine the demand for gasoline from a bil-

on whatever goodie has been left next to the

lion more motor scooters or automobiles or air

coffee machine mid-afternoon and we’re too

conditioners in China and India.

tired when we get home at the end of the day

However, in the shorter term oil supplies

for any exercise more strenuous than a beer

can be manipulated to some extent by the “oli-

and a couple of hours of mindless television.

gopolists” who control supply and worldwide

We know what we ought to do, but we don’t

demand will fall as economies move through a

act appropriately on that information.

deep recession in 2009. It didn’t make a lot of

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We are sometimes equally irrational in our

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ECONOMIST OUTLOOK

business decisions. We buy a big car that guz-

supply is limited and demand will continue to

zles gas, turn up the thermostat instead of

increase.” We heard that again as recently as

putting on a sweater and then complain about

last summer. In the 1990s, the mantra was,

energy prices and our dependence on foreign

“There’s a new paradigm. This boom is fueled

oil. We buy a house we can’t afford or make a

by demand for new computer and communi-

mortgage loan to someone with little pro-

cation technology, which can only increase.”

spect of being able to repay it once the loan

In the 2000s it was, “This time it’s different.

amortizes and the rate adjusts to the market.

Computer modeling and technical brilliance

We purchase stock in a company that is wildly

have reached a level where we can eliminate

overpriced or speculate in real estate because

risk by slicing and repackaging it.”

the pigs are flying and we convince ourselves prices can only go up.

Those who work in the real estate finance arena have heard it over and over again.

Not only that, we seldom learn from our

“This time it’s different. Home prices/office

mistakes. Back in the 1980s, when oil prices

prices/retail center prices will continue to go

plunged below $10 a barrel and the Mountain

up. If the borrower gets in trouble, the proper-

West went through a severe recession at the

ty can be sold for more than the balance of the

end of the energy boom, bumper stickers

loan.” That was the assumption underlying the

appeared reading, “Please just give us one

subprime/Alt A mortgage boom. In most

more energy boom and this time we won’t

cases, lenders weren’t dishonest or greedy and

mess it up.” Well, guess what happened in the

borrowers weren’t stupid. We merely suc-

Mountain West as oil surged to $150 a barrel?

cumbed once again to the illusion that this

Yep, we’ve done it again.

time it’s different.

Which brings us to the next rule:

Rule Number 8:

The four most dangerous words in

8

economic analysis are, “This time

ied economic theory, markets functioned in a

it’s different.” When you begin to hear or read

perfect world with an infinite number of buyers

this about the economy or an investment

and sellers, all behaving rationally in response

opportunity, head for cover.

to perfect information. In this world, according

7

Rule Number 7: There is no new paradigm.

Adam Smith was right — the market works (usually).

In the ivory tower where we stud-

In the 1980s we were told, “This time it’s

to Adam Smith (The Wealth of Nations, 1776),

different; — oil prices can only go up, since

the invisible hand of competition causes each

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ECONOMIST OUTLOOK

of us, acting in our own self-interest, to arrive

the borrower was making regular payments.

at the optimal price and quantity. If we try to

When the information finally began to leak out,

charge too much, another firm will move in

the market worked just fine. Borrowers default-

and undercut us. If we try to buy too cheaply,

ed, risk premiums soared and prices collapsed.

another consumer will step up and pay a high-

It wasn’t that the market wasn’t working, it was

er price.

that we didn’t like what it told us.

Of course, we know that the real world isn’t a model of perfect competition. However, in many cases, there are large numbers of buyers and sellers with a great deal of information, acting relatively rationally most of the

9

Rule Number 9: Globalization is good — simply an example of specialization and division of labor, which increase productivity and output.

Never make the mistake of believing someone’s forecast (even your own).

This is the Adams corollary to another important finding of Adam Smith. I’ve cited his example of the pin factory in this column in the past — a dozen workers, each concentrating on a single aspect of pin production, can produce many times more pins than a single

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time. In the mortgage market of recent years

worker performing all of the different opera-

there were huge numbers of buyers (borrow-

tions. Henry Ford used this concept to devel-

ers) and sellers (mortgage lenders) who con-

op the automobile assembly line, making a

vinced themselves they were behaving ration-

fortune for himself as he made cars affordable

ally.

for the average American family.

What went wrong? The problem was the

Having each country specialize in what it

lack of information. No one knew what was in

can produce most efficiently provides cheaper

the packages of securitized loans. No one

goods and services for all of us. The world

knew how much of the home price increase

ends up with more jobs, higher incomes and

was driven by real demand and how much

workers and consumers who are better off. Of

was pure speculation. No one who held a loan

course there is dislocation as industries shift

in a mortgage-backed security knew whether

and/or disappear, and some of the gains from

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ECONOMIST OUTLOOK

trade should be used to retrain those who lose

long ago, “What is the probability that things

their jobs.

will never get any better?” That is one question

As is true during any period of dislocation

I can answer with absolute assurance that I will

and readjustment, we must accept some

be right. The probability is zero. This will be a

short-term pain for longer-term benefits. If

long, difficult recession — it has already lasted

Detroit can’t produce automobiles cost-effec-

more than a year and job losses are accelerat-

tively and efficiently, cars need to be produced

ing. However, it will end and a long period of

elsewhere. There are other industries in which

economic growth will follow.

Detroit can excel and the quicker they turn to

Which brings me to a piece of advice (which

those, the better for all of us. When we resist

I make it a habit never to give): Never make the

this sort of change, it creates problems down

mistake of believing someone’s forecast (even

the road.

your own). That’s where all of those Wall Street credit whizzes went wrong. They fed data into

10

Rule Number 10:

complicated computer models that no one

Bubbles overcorrect on the

really understood, then looked at the equa-

downside.

tions and four-color graphs suitable for fram-

Just as we irrationally believe on

ing that appeared on the screen. Then, they

the way up that the pigs are flying and prices

made the fatal mistake — they believed what

will only rise, so on the downside we convince

they saw.

ourselves it will get worse and worse.

Forecasting is a valuable tool. It takes past

Consequently, for a while it does. Stock prices

history and projects forward what is likely to

fall below the value of the underlying compa-

occur if history repeats itself. But, of course,

nies they represent, home prices plunge below

when history is repeating itself, no one needs

replacement costs, energy costs drop too low

computer models and high-priced economists

to cover production and exploration expenses.

to do this — we are all experts. And, when histo-

All three are occurring as we enter 2009.

ry isn’t repeating itself, the models don’t work.

This sets up the environment for the next

So, use economic forecasters for what they can

cycle of growth and prosperity. For every seller

do well. They can help you understand where

who loses his investment or his home on the

the economy is, how we got here and the forces

way down, there is a buyer who has likely

in motion that will help determine where we go.

picked up a bargain. A reporter asked me not

But remember — it is just a forecast.

MARCH / APRIL 2009

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Dr. Tucker Adams is the president of The Adams Group Inc., an economic consulting firm specializing in regional (particularly the Mountain West) and national economics, as well as Russia and the former Soviet Union. She can be reached at (303) 329-9218 or tuckhadams@aol.com.

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The Crumbling American Dream

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LEGISLATIVE FOCUS

WILL PRESIDENT OBAMA AND THE NEW ADMINISTRATION BE ABLE TO HALT THE CARNAGE?

BY SCOTT HOOVER

he American Dream of prosperity and home ownership is collapsing all across the country. In neighborhoods from the boroughs of New York to the cities of California, mortgages continue to balloon and banks continue to move in to foreclose, deflating the stereotype of American prosperity for all homeowners, including Asian Americans.

As we have all heard on the news over the past few months, President Barack Obama and his administration continue to work overtime to curb the rate of foreclosures and to stimulate an economy in its worst condition since the Great Depression.

What does all this mean for Asian American and minority homeowners who have been hit as hard, if not harder than most Americans by the latest housing crisis? A/R/E spoke with representatives from Housing and Urban Development (HUD) and U.S. Representative Michael Honda (CA-15) to see how President Obama and the new administration plan to work with minority homeowners to halt the growing housing crisis.

T

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LEGISLATIVE FOCUS

Keeping Minorities in Their Homes

American Housing Rescue and Foreclosure

For many years, research has indicated that

Prevention Act, H.R.3221,” he says. “I supported

Asian Americans have not been affected by

this comprehensive legislation that expanded

mortgage downturns and most recently, the

the Federal Housing Administration’s mort-

mortgage crisis; however, with the problem as

gage insurance program. This allows families, in

widespread as this economic downturn has

danger of losing their homes, to refinance into

become, the research has been wrong.

more manageable lower-cost government-

U.S. Representative Michael Honda is the

insured mortgages. The bill provides $180 mil-

chair of the Congressional Asian Pacific

lion for pre-foreclosure counseling and $30 mil-

American Caucus (CAPAC). He says he is very

lion in grants for legal assistance to help families in foreclosure.

“The numbers show the reality of what’s going on.”

Sean Moss Regional Director, HUD

“I look forward to working with the Asian Real Estate Association of America and similar organizations in our community to ensure adequate outreach to Asian American, Pacific Islander, and other underserved communities who may benefit from this funding,” Honda

concerned that the American mortgage crisis

adds. “On behalf of CAPAC, I will continue to

has disproportionately impacted minority com-

work to ensure that these minority communi-

munities, particularly low-income Asian Ameri-

ties receive appropriate attention in federal

can and Pacific Islander neighborhoods that are

policy debates.”

often isolated linguistically and culturally.

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Recently, new facts have started to come to

When asked what types of programs are

light about how the housing crisis and eco-

available right now for minorities that might

nomic downturn is affecting Asian American

help keep them in their homes and what new

homeowners.

programs might be offered to these minority

Lisa Hasegawa, executive director of the

families to help them in the future, Honda said

National Coalition for Asian Pacific American

there are a number programs that are address-

Community Development, said her national

ing these needs.

organization conducted a recent study with

“Last July, the House of Representatives

numbers from the Federal Reserve that cross-

passed and President Bush signed into law, the

referenced ZIP codes with high foreclosure

MARCH / APRIL 2009

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LEGISLATIVE FOCUS

rates and large Asian-American populations.

mitment to ensure that all Americans have a

“In New York state, those ZIP codes with the

chance at the American dream of homeowner-

highest foreclosure and the highest Asian pop-

ship,” says Representative Honda. “As a member

ulation was [in] Jackson Heights,” she said.

of the House Appropriations Committee, I will

“Nationwide, the foreclosure rates were much

continue to support programs that create

higher than expected.”

opportunities for low-income and first-time

“I think it really shines some light on the myth that all South Asians are prosperous,” said Sean

homebuyers and spur revitalization in low- and moderate-income communities.

Moss, regional director of the federal Housing

“Through my role as CAPAC chair, I will

and Urban Development Department. “The num-

work closely with the Obama administration to

bers show the reality of what’s going on.”

hold predatory lenders accountable for irre-

Keith Getter, a management consultant

sponsible lending policies,” he adds. “Simul-

with the housing-counseling training nonprof-

taneously, I’ll work to ensure public access to

it NeighborWorks America, said that in commu-

the information needed to make wise financial

nities of color, the road to foreclosure is often

decisions. This includes funding for financial

paved with good intentions on both sides.

literacy, financial counseling, and foreclosure

During his campaign, President Obama

prevention programs, particularly for low-

talked about how minorities many times were

income, minority, and new American commu-

taken advantage of within the home-buying

nities, as well as first-time homebuyers.”

process.

Due to the fact that California is one of the

“[Often] the person who was trusted ended

hardest hit areas of the country with foreclo-

up not being mindful of what the buyer could

sures, Representative Honda has had a first-

afford down the road,” said Getter. “It was your

hand view of the problem in his own home

neighbor, who looks like you, who was the

state. He says there are a number of ideas that

mortgage broker.”

he is using in California that may be used in the

Representative Honda plans to work with

L to R: Allen M. Okamoto; California Assembly member, Ted Lieu (53rd District); Mike Honda; Jim Park.

bigger, U.S. problem.

President Obama and his administration to place to make sure all homebuyers are on a

Honda lists these initiatives: Increasing FHA Loan Limits

level playing field.

“Even as foreclosures hit record levels,

address these issues and to put safeguards in

“I applaud President Obama for his com-

Californians face some of the highest home

MARCH / APRIL 2009

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LEGISLATIVE FOCUS

“With the current state of our economy, timely investments in America’s economic growth and stability are crucial.”

Michael Honda U.S. Representative

prices in the country,” he says. “Given this reali-

wise be able to buy a home,” Representative

ty, any expansion of affordable mortgage loan

Honda says. “These programs help people put

opportunities is especially important for Cali-

down roots, spend more time in family activi-

fornians. The American Housing Rescue and

ties, and be more involved in their children’s

Foreclosure Prevention Act, a bill, which I sup-

lives, their schools, churches, and civic activities.

ported and which was signed into law last

On a federal level, I will continue to support ini-

year, temporarily increased Federal Housing

tiatives that help families transition from rent-

Administration loan limits. I also voted for the

ing to homeownership.”

second stimulus package, passed last month in tinue to advocate for a permanent increase in

Foreclosure Prevention in California’s 15th District

FHA loan limits to assist American homeowners

“About 250,000 California properties were in

in California and throughout our country.”

foreclosure in 2008. In Santa Clara County

the House, which extends this increase. I will con-

alone, there were 6,268 foreclosures last year,

Assisting First-Time Homebuyers

up 270 percent from 2007,” he says. “To mitigate

“In my role as Appropriator, I worked with my

these trends in my district, I hosted a workshop

colleagues to advocate for federal dollars to

on foreclosure prevention in which public and

organizations such as the Housing Trust of

non-profit agencies provided one-on-one

Santa Clara County. The Trust created the First-

counseling to local homeowners. At the work-

Time Homebuyer Assistance Program to give

shop in San Jose, counselors from agencies such

workers better opportunities to buy their first

as the U.S. Department for Housing and Urban

home,” he says, “The Trust provides gap financ-

Development (HUD) gave residents an overview

ing to developers of affordable multi-family

of the many programs available free of charge to

rental units, emergency shelters, transitional

distressed homeowners. In Congress, I will con-

housing, and housing for special needs popula-

tinue to support funding for foreclosure preven-

tions.

tion programs directed toward underserved and

“Programs such as these are essential for first-time homebuyers who would not other-

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MARCH / APRIL 2009

minority homeowners.”

The $789 billion stimulus package recently

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LEGISLATIVE FOCUS

signed into law by President Obama also has

“Finally, I support strengthening the Low

aspects that will help keep minorities in their

Income Housing Tax Credit (LIHTC) program in

homes.

the economic stimulus legislation,” Represent-

“With the current state of our economy,

ative Honda adds. “This program has a twenty

timely investments in America’s economic

year history of successfully fostering public-

growth and stability are crucial. For this reason,

private partnerships and attracting private

I voted in support of the American Recovery

investment to support the development of

and Reinvestment Act of 2009. This economic

over two million units of affordable rental

stimulus legislation includes funding that

housing. The economic crisis and disruption of

would help to stabilize low- to moderate-

capital markets now threatens to undermine

income communities, including minority com-

the viability of this program and halt hundreds

munities, through a variety of measures,” says

of pending affordable housing developments

Representative Honda.

that would benefit disadvantaged communi-

The bill includes $4.2 billion for the

ties from New York to Honolulu. Without con-

Neighborhood Stabilization Program for activi-

gressional action these projects will be lost

ties related to the redevelopment of vacant,

precisely at the moment when communities

foreclosed properties in order to create more

desperately need the developments, both for

affordable housing and stabilize home values.

jobs and affordable housing.”

There is also $1.5 billion for the HOME

Honda, like President Obama and many

Investment Partnerships Program, which pro-

other Senators and Representatives are contin-

vides grants to state and local governments

uing to be strong supporters of these impor-

who partner with nonprofit groups to increase

tant programs. This funding supports the work

homeownership and affordable rental housing

of government agencies, public-private part-

for low-income households. Finally, the stimu-

nerships, and community-based organizations

lus legislation includes $1 billion for the

with expertise in reaching Asian American and

Community Development Block Grant Program

Pacific Islander households, and ultimately

(CDBG) to benefit low- and moderate-income

helping them to boost homeownership rates in

households, and revitalize neighborhoods.

our communities and across the nation.

MARCH / APRIL 2009

are

MIKE HONDA has represented the 15th Congressional District of California in the U.S. House of Representatives since 2001. He is serving his second term as Chair of the Congressional Asian Pacific American Caucus.

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FORECLOSURE PREVENTION

S TOPPING F ORECLOSURES resident Obama and his administration

gible modification they make. And they’ll get

P

affordable monthly payments,” Obama said.

by helping up to 9 million homeowners rework

Refinancing help. Homeowners who took out

In addition, homeowners who remain in

their mortgages to avoid foreclosure on

loans owned or guaranteed by Fannie Mae or

their properties and stay current will get a

February 18.

announced a $75 billion plan aimed at shoring up the flagging housing market

another $1,000 a year for three years as long as

The plan involves:

the homeowner remains current on payments.

Freddie Mac will be able to refinance through

monthly balance reduction to reduce their loan

“In the end, all of us are paying a price for

those institutions — a plan designed to help

principal. That will amount to up to $1,000 a

this home mortgage crisis. And all of us will

millions of homeowners who can’t refinance

year for five years.

pay an even steeper price if we allow this crisis

because they owe more on their homes than

to continue to deepen — a crisis which is

they are worth.

Money to avoid defaults. The plan includes an

unraveling homeownership, the middle class,

Currently, homeowners who owe more

incentive of $500 to lenders and $1,500 to

and the American Dream itself,” President

than 80 percent of the value of their homes

homeowners if loans are modified before mort-

Obama said at his formal unveiling of the plan

have a tough time refinancing; nearly one in

gage holders fall behind.

in Mesa, AZ.

seven homeowners is “underwater” on their

The plan includes refinancing mortgages of

loan, about 12 million homeowners, nearly

“This will be successful enough (to help sta-

up to 5 million homeowners to make their pay-

double the 6.6 million who were underwater

bilize) the market,” says economist Mark Zandi

ments more affordable. It also involves an ini-

at the end of 2007, according to Moody’s

of Moody’s Economy.com. “It’s going to cost tax

tiative to reach up to another 4 million home-

Economy.com.

payers money, but it’s a nice mix of policy steps

owners by lowering the risk of imminent

that will have a mitigating impact on foreclo-

default with a “homeowner stability initiative”

Housing stability. The plan earmarks $75 bil-

sures. It won’t stem them, but it will mitigate

to reduce their monthly payments.

lion to help homeowners stay in their proper-

the increase.”

“The plan I’m announcing focuses on rescu-

ties. To reduce monthly payments, lenders

ing families who have played by the rules and

would be responsible for lowering interest

acted responsibly: by refinancing loans for mil-

rates so the borrower’s monthly payment is no

“By making these investments in foreclo-

lions of families in traditional mortgages who

more than 38 percent of income. After that, the

sure-prevention today, we will save ourselves

are underwater or close to it; by modifying

government would help lower payments by

the costs of foreclosure tomorrow – costs borne

loans for families stuck in sub-prime mortgages

matching further interest-rate reduction pay-

not just by families with troubled loans, but by

they can’t afford as a result of skyrocketing

ments to bring the ratio down to 31 percent.

their neighbors and communities and by our

interest rates or personal misfortune; and by

Zandi says the total cost of the plan could run up to $100 billion.

economy as a whole,” Obama said. “Given the

taking broader steps to keep mortgage rates

Incentives. As an incentive, companies that

magnitude of these costs, it is a price well

low so that families can secure loans with

service home loans will get $1,000 for each eli-

worth paying.”

MARCH / APRIL 2009

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Fixing The Problem AREAA members offer their advice regarding the housing crisis facing the U.S.

It appears the government is ready and willing to do whatever it takes to fix the housing crisis, but there is still one question — will it work?

s part of the new stimulus package, the

A

government has included homebuyer tax credits, and not just for first-time

BY SCOTT HOOVER

homebuyers, but for all homebuyers purchasing a primary residence. In addition, the government is attempting to drive mortgage rates down and working particularly hard to modify troubled loans to keep homeowners out of foreclosure. With these new measures in place the housing market will surely recover… right?

The answer to that question depends on your definition of recovery. Will it be enough to stop prices from falling, and possibly even help them start going up again? It’s definitely possible. What other ideas are out there to cure what ails the U.S. housing market? AREAA members joined in with their ideas on how to stimulate the U.S. housing market and prevent foreclosure and reestablish the American Dream of homeownership in the Asian community.

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SOUNDING BOARD

“Real estate values will

“Put a temporary freeze on the property tax.

“Lenders need to respond to

rebound, it is a matter of

‘Special’ assessments have become the norm for

short sales in a timely man-

when, not if. We need to

most properties. Even reverting and limiting the

ner. Lenders respond to REO

allow qualified, distressed

property tax to 1 percent on the purchase price

in a matter of days to

homeowners to refinance

would alleviate the cost of new ownership, may

approve/deny offers. Many

the amounts they can

attract more qualified buyers, and the short-term

of the short sales we have in

afford and repay the

loss of revenue would more than be made up in

escrow have been there for

remaining principal they

more sales.”

cannot when they sell or values rebound. The first

more than three months.

- Lucy, La Crescenta, CA

lien refinanced as a conforming FHA/Conven-

The buyers give up and lose the interest to buy. I feel that by having short sales moving faster, it

tional loan and a second lien at the present Fed

“We, as AREAA members must do anything and

would be a huge boost to the economy from a

rate of 0 to 1% for the remaining balance, to be

everything to educate ourselves so that we can

Real Estate standpoint.”

paid at time of sale or reviewed at five-year inter-

serve our community as confident consultants,

vals.”

not as sales people.”

- Gina Duncan, Maui, HI

- Joseph Ho, Bellevue, WA

- Yangsook Ku, Atlanta, GA

“The lenders should take back the homes and try

“Congress should enact a

fy loans to those taxpayers by making mortgage

to sell them, but keep the previous owner in the

one-time taxpayer bailout,

rates fixed to current market rates and reducing

home as a tenant, paying market rent on one year

giving people who file a feder-

the principal balance by 50 percent of the differ-

leases. When a home sells the new owner must

al income tax return $1 mil-

ence between balance due on loan and current

honor the existing lease. This would at least keep

lion. With this money people

market value of the property.”

people from being thrown into the street and give

will pay off debts, invest in

them time to find a long-term place to live, either

Wall Street and have more

by renting, or by buying a much less expensive

money for education. With almost everyone

“Press releases with a positive spin. As the local

home.”

becoming an instant millionaire it will be up to

newspapers and television stations reported

“With the money lenders received in the bailout from taxpayers, they should be required to modi-

- Carmen, Los Angeles, CA

“Additionally, the government should stop

the people to figure out how to maintain their

defaults; etc; that really scared the public. Many

distorting the market and let it run its course. The

lifestyle reasonably. Companies will figure out

Americans follow the media as the true source —

long-term solution is to keep it from happening

how to get their hands on this money and this will

so that should be the priority.”

again by passing a Constitutional Amendment

keep them solvent. The key to this plan is to not

that prohibits all levels of government from dis-

think about it too long, just do it.”

torting markets of any kind. True free markets are

- Annette DiResta, Hillsborough, CA

- Ira Bland, La Crescenta, CA

self-correcting. The government should only be charged with making sure there is no fraud, theft, corruption, and/or other blatantly illegal acts.”

- Mark Cohen, Gainesville, FL

MARCH / APRIL 2009

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SOUNDING BOARD

Tightened mortgage lending standards are offsetting the Fed’s trillions in spending

BY BRIAN CHUNG

t’s my opinion that the financial crisis erupt-

going to tighten lending standards, they

ed in the second half of 2007 when sub-

should have done it at a pace that would allow

prime borrowers started to default on their

middle class Americans to adapt. This overre-

home mortgages. It is interesting to note that we

action by lenders is similar to a hypothetical

all agree on what started the crisis, but no one,

situation like the U.S. Homeland Security

including the Federal government, knows what

deporting all of the illegal immigrants in the

will end or even mitigate the crisis. The Fed has

U.S. in a very short period of time. If all of the

spent hundreds of billions of dollars, mostly bail-

illegal immigrants were to disappear over-

ing out the financial institutions, but the econo-

night, the U.S. market would collapse. The col-

my is yet to show any signs of recovery. It seems

lapse of the U.S. economy could be prevented

that they have forgotten common sense, and

if the changes were made more slowly.

I BRIAN CHUNG

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have even committed to spend trillions more

No lenders are in a position during the eco-

dollars to contain the financial crisis. Aggressive

nomic crisis to loosen lending standards. It

spending alone by the Fed will not prevent the

would not make sense to wish these lenders to

economy from going into a deep recession.

start lending aggresively when they have their

The Fed and policymakers must under-

own problems with losses in their back yard.

stand that mortgage lending standards swung

The Fed should take a leadership role, rather

from the too loose sub-prime standard to the

than passively relying on these lenders, and

historic high credit crunch in a very short peri-

offer more realistic qualifying standards that

od of time. It does not take a rocket scientist to

reflect today’s financial realities. Lenders have

notice that lending standards have tightened

headed the other direction to the extreme that

too fast and too furiously to allow the market

it practically makes it impossible for middle

to adapt. For instance, in the first half of 2007,

class Americans to get home mortgage loans.

home buyers could borrow up to $1 million

While the Fed is pouring out hundreds of bil-

without verification of income and assets, and

lions of dollars to save the banks and Wall Street

possibly without any down payment. By the

from mortgage defaults, it makes sense to pour

second half of 2008, home buyers could not

some of the portion into helping middle class

secure a mortgage from many banks if

Americans qualify for home mortgage loans.

income-to-debt ratio is not 45% or less, no

There are many would-be home buyers that

matter how much they put down. If they were

cannot get home mortgage loans today.

MARCH / APRIL 2009

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FORECLOSURE PREVENTION

BRIDGES TO HOMEOWNERSHIP (B2H)

BY KIMBERLY PARK , AREAA-LA EDUCATION CHAIR

ments. They don’t see a hope of recouping any

I. Short-Sale Program

he members of AREAA Greater Los Angeles, a multicultural coalition of real estate practitioners, present these foreclosure prevention measures. This paper is the result of on-going research and dialogue with our clients, colleagues in real estate sales, lenders, and other practitioners of the real estate business in general.

I. Short Sale program – This is a remedy for

sures look better on banks’ balance sheets as

distressed property that must be sold, either

they can book them at full face value. Short sale

T

benefit from future appreciation and they

There is nothing short about our current Short-

know credit can be repaired over time.

Sale process. The typical delay is 3-8 months

Any loss mitigation effort should be done

from offer to closing. Many buyers walk away

in the language of the borrowers. Many in

by the time the lender comes back with an

minority communities are unwilling to call a toll

answer. Buyers are unwilling to pay the original

free service. It’s too impersonal and intimidat-

price after a long wait or simply get cold feet.

ing. Proactive action with attention to chang-

This is a real tragedy.

ing borrower behavior is the key to saving

Short-Sale is an effective tool that saves

homes and averting crises small and large. We

money for the banks and the government. If

need tools that will remedy the problems of

short-sale fails, then the property becomes

yesterday, but also prevent additional foreclo-

bank-owned, costing the bank an additional 20

sure on a large scale. We propose to accomplish

percent to 40 percent loss eventually.

both in our plan, B2H:

However, the banks seem unable or unwilling to expedite this process. Perhaps foreclo-

With the experts predicting a second wave

because it does not qualify for loan modifi-

reduces their asset base and the loss must be

of foreclosures hitting the market in 2009 from

cation or the owner no longer wishes to

recognized immediately. Short-term account-

Alt-A papers and a third wave involving prime

keep it.

ing may be the culprit.

to find a solution to this rising inventory and

II. Deed in Lieu of Foreclosure with a new

Here are recommendations from

declining real estate value is urgent. More

twist – This will be for owner-occupied proper-

the Realtors in the trenches:

prime borrowers are contemplating default

ties where the homeowner wishes to stay in the

1. Create a national clearing house to do short

even though they can make the monthly pay-

property.

borrowers starting in 2010 and 2011, the need

MARCH / APRIL 2009

sales quickly using universal guidelines.

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FORECLOSURE PREVENTION

2. All banks using TARP money must follow these guidelines.

people who may be gaming the system. Trying to determine who deserves help truly is a timeconsuming, monumental task that most loss

3. We can use a national multicultural network

mitigation departments of the banks are ill-

of realtors trained to do short sales to serve

equipped to deal with. Many borrowers, espe-

borrowers in their own language. In the

cially in minority communities, are not aware of

absence of effective buyer counseling and

the resources available for delinquent home-

reasonable expectations, fear sets in and

owners.

buyers flee.

B2H Deed in Lieu of Foreclosure 4. Stop the foreclosure clock once a Short-Sale package with an offer has been submitted.

will work this way: 1. Government buys the property from banks at a “short-sale” price, current market

5. Some negotiators behave like thugs with all

value.

the power and leverage on their side.

Inefficient, abusive or ignorant (often all

2. Homeowner signs the deed over to the

three) negotiators cost taxpayers (and their

government entity, say B2H. The original

own employers) big money.

lender and B2H agree not to report negative comments to the credit reporting agencies.

II. Deed in Lieu of Foreclosure with a New Twist

3. Homeowner pays market rent plus some

HOPE–NOW reports that the re-default rates on

administration fee (say 10 percent) and

loan modifications after 6 months are as high as

retains an option to repurchase in 5 years or

50 percent.

less at the pre-determined price.

Loan modifications are too slow to help a large number of homeowners facing defaults.

Fear, confusion and misinformation are

4. The owner, B2H, will pay the property tax, HOA fees, if any, and collect the rent.

abound in the market. Very few borrowers get real relief the first time they call the bank. As a

5. The government receives revenue from the

result, many simply let their property get fore-

cash flow generated from the 5-year income

closed.

stream, plus the full repayment of the

Some banks are unwilling to help borrow-

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principal at the end of 5 years. This is a

ers who are not delinquent, creating a real

sensible way to recoup some of the bail-

catch-22. Banks fear they might be helping

out money for the taxpayers.

MARCH / APRIL 2009

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FORECLOSURE PREVENTION

6. Land contract sale can prevent homes from

6. If homeowner/renter is irresponsible during

being used as ATMs as B2H is the legal

the 5-year period, a simple eviction will get

owner.

them out. It’s not a foreclosure process. It can be rented or sold now.

7. The only criteria for qualifying for the home owner is that they are able to pay the

Perhaps the loss, as well as the eventual

market rent. They do not have to be in

profit can be shared by all parties in the deal to

default to participate. This is “no-fault”

make this attractive to the investors holding

divorce.

the notes. Also, loans with junior liens might need a special provision to qualify under this

Benefits of B2H: 1. This prevents defaults, not encourages, in a simple, fast, large-scale manner.

program.

We hope our ideas prove to be useful and invite further discussions and collaborations in our common search for solutions to the crisis

2. Families can stay in the house, in the same

facing our country.

are

neighborhood and school district. The social benefit of stabilizing the families in distress is enormous.

3. There is no bailout of “unworthy” borrowers.

In essence, the borrowers are losing the house. This will satisfy even the most conservative among us who want to see irresponsible borrowers lose their house as a moral lesson.

4. The homes will be kept away from the vultures (flippers, speculators, etc.)

KIMBERLY PARK serves as 5. The program will keep these homes in the

Education Chair and a

care of the homeowners who bought the

Director on the board of

house they love. They will continue the

AREAA Greater Los

upkeep as they can soon reclaim it.

Angeles.

MARCH / APRIL 2009

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CREDIT REPAIR

Credit Repair Do it yourself or hire a credit restoration company?

BY BRIAN C. ABER

W

hen looking to challenge derogato-

mention is by using this method they are not

ry items with requirements outlined

required to comply with specific areas of the

in the Fair Credit Reporting Act, a

law that protect consumers, such as forwarding

consumer typically has two options: Do it

your dispute to the creditor or supplying your

themselves or hire a professional credit repair

client with the process of verification. These

agency. Which is better? What should you tell

methods typically cause “soft deletes” and the

your clients? It depends on the situation.

item reappears after a couple of months.

There are many factors that one has to take

This is typical of their defense strategy of

into mind when planning the credit repair

“Attrition and Delay.” With entities that make

process. It’s bad enough with the level of crite-

more money when consumers have derogatory

ria involved within the Fair Credit Reporting Act

items and good credit data being considered

to handle a proper dispute without having to

“unsellable,” how can you assure your clients are

deal with the mis-truths and anti-credit repair

being dealt a fair hand?

propaganda produced by the credit bureaus and their affiliates.

Take the statement “you can do it yourself” and apply it to businesses that aren’t involved in credit repair. How many other valuable serv-

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What To Do?

ices can be done by the client themselves?

The credit bureaus will promote the online dis-

While many of us can do our own taxes, mow

putes system as a reputable way to clean up

our lawn and even represent ourselves in court,

your credit report; however what they fail to

we hire professional accountants, landscapers

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CREDIT REPAIR

and attorneys for matter of lack of expertise

statistic to let your clients know about is the

and convenience.

agency’s fix/deletion ratio, which is the total

Consumers can do it themselves or you

number of deleted items divided by the total

can try to help your clients yourself. If you

number of derogatory accounts. Also, tell

are prepared and committed to the entire

them to find out what that fix/deletion ratio is

process then it is recommended to visit

for the first round of correspondence.

BrokenCredit.com, research the Fair Credit Reporting Act, and stick to a plan.

Is the agency posting recent results on their Web sites or are they outdated? If results

Please make note that loan originators

are several years old, take that into considera-

should still be careful with what advice they

tion. Does the company charge per deleted

hand out and its level of accuracy. While you

item? This can get very expensive for con-

may not be a credit repair company, you can

sumers of agencies that are very successful at

still be held liable under the Credit Repair

what they do. Does the company charge their

Organizations Act if you are financially tied to your client. Make sure correspondence to the bureaus are effective and provide a clear and

The No. 1 qualification to use when researching

legible proof of address and social with your disputes.

credit repair companies is results.

If your clients are considering utilizing the services of a professional credit restoration company, then you need to tell them to do

fees upfront? Charging upfront for credit

their homework; just not as much. Let them

repair is illegal unless they are exempt from the

know the No. 1 qualification they want to use

Credit Repair Organizations Act. Don’t let the

when researching credit repair companies is

membership fee fool you; it’s still an upfront

results. These companies can have all the bells

charge no matter what way you look at it.

and whistles, preach about how many attor-

While I will only vouch for the company I

neys they have working for you or that they

work for, there are plenty of ethical and expe-

have “Attorney Facilitated” services, or even be

rienced companies out there. For example,

a little less expensive then the next guy. None

members of the National Association of Credit

of this matters unless they are producing

Services Organizations (NACSO), www.nacso.org,

results and achieving higher credit scores.

go through a very strict and rigorous applica-

You might have seen some agencies claim

tion process. Ethical and experienced compa-

they have removed 11,237 late payments. That

nies have been here to help your clients and

BRIAN C. ABER is a Senior Account

sounds impressive until you find out they’ve

will continue to be here for many years to

Executive with HTDI Financial and sits

only serviced 12,000 clients. A more important

come.

MARCH / APRIL 2009

are

on the Board of Advisors for NACSO.

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2:24 AM

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POLICY GOALS

AREAA 2009 P OLICY GOALS BACKGROUND

Increase post-purchase counseling in Asian

The Asian American population made tremen-

languages by HUD counselors and loan ser-

dous gains in homeownership in the early part

vicers

of the decade, increasing the national homeownership rate from 53% to 59% between

Allocate federal funds (as determined by

2000- 2005. These recent first time homeown-

HUD) and create CRA benchmarks (to be set

ers face significant challenges in the current

by the appropriate regulatory body), to

real estate environment, such as a lack of built-

ensure that banks and financial institutions

up equity and certain cultural characteristics

provide effective loss mitigation services and

that prevent qualification for financing. To pro-

outreach into the Asian, and other under-

tect homeownership in Asian American com-

served communities

munities, the housing industry and related legislation need to focus on two key issues:

Reform the loan servicing industry to create

loss mitigation and increased access to credit.

more consistent workout options and efficient short sale procedures, to help more home-

LOSS MITIGATION

owners avoid foreclosure

Approximately 60 percent of the Asian popula-

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tion in the U.S. is foreign born, creating signifi-

INCREASED ACCESS TO CREDIT

cant linguistic barriers in communication with

Well-qualified Asian Americans are unable to

mortgage servicers. During the property

obtain financing due to increasingly tight

acquisition and financing process, a homebuy-

mortgage standards and a lack of credit histo-

er has access to in-language services from real

ry, caused by a cultural tendency to avoid use

estate agents and mortgage professionals in

of traditional credit. In addition, the Asian

their community. However, post-purchase,

American community tends to have the high-

Asian homeowners have limited options in

est small business ownership rate as well as

their native languages to discuss alternatives

self employment. This employment pattern

to foreclosure in times of financial distress.

tends to suppress the purchasing power of the

To effectively protect homeownership in

potential homebuyers. Additionally, Asian

the Asian American community, lawmakers

Americans have not historically been signifi-

and loan servicers should pursue the follow-

cant users of FHA insured loans, due to loan

ing:

limits and income documentation require-

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2009

POLICY GOALS

2009 AREAA EXECUTIVE BOARD ments, thus creating unfamiliarity with the most prominent mortgage option available today.

To ensure Asian Americans have access to credit, lawmakers and banks should pursue the following: Increase mortgage qualification flexibility to qualify more applicants if they meet monthly and down payment requirements with a long term interest in the home

Allen Chiang Chair

John Fukuda Chair-Elect

Emily Moerdomo Fu Immediate Past Chair

John Y. Wong Founding Chair

Allen M. Okamoto Founding Chair

Jim Park President & CEO

Create mortgage solutions for small business owners who have relied heavily on stated income products in the past, including a more flexible FHA product for small business owners and self employed borrowers Increase education and outreach in Asian communities to promote awareness about FHA products and the benefits they provide Make federal loan limit increases permanent to reestablish federally insured loans as a viable option in high cost markets where Asian Americans typically live Implement alternative credit rating tools to provide opportunities for mortgage financing among Asian and immigrant borrowers with little or no traditional credit

are

Kathy Tsao Secretary

MARCH / APRIL 2009

Rob Mehta Treasurer

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HOT TRENDS

CONDO-HOTELS BOOMING WITH POTENTIAL Hot Trend in Vacation Homes Appeals to Baby Boomers

BY LARRY COHEN

T

here has never been a more challeng-

in buying power, baby boomers (ages 44-62 in

ing time to be a mortgage broker, with

2008) are blooming, according to consumer

dwindling home sales and tightening

expert Iconoculture.com.

lending standards making deals harder and

“At the upper end, they’re empty-nesting,

harder to come by. Today’s mortgage profes-

grand-parenting and reinventing retirement.

sional has two choices: give up and get out, or

They’ll scrimp and splurge to share the good

adopt the attitude of political patriarch Joseph

life with loved ones.” Favorite indulgences

P. Kennedy who said, “When the going gets

include travel and “a well-feathered nest for

tough, the tough get going.”

entertaining.”

Real estate agents interested in exploring

This description supports the 2008 Leisure

outside-the-box opportunities to enhance

Market Research Handbook that reports the

their pipelines should consider reaching out to

$2.4 trillion leisure market is being fueled pre-

the estimated four million baby boomers that

dominantly by baby boomer spending, with

will turn 50 this year.

significant marketplace growth expected for the foreseeable future.” Additionally, National

The Buying Power of Boomers

Mortgage Broker reported in January that

The Baby Boom generation, born between

baby boomers are more willing to take on new

1946 and 1964, represents 28 percent of the

mortgage debt to purchase vacation proper-

U.S. population. With an estimated $2 trillion

ties to enjoy.

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HOT TRENDS

Clearly, this is a demographic ripe with potential for vacation second-home mortgage lending.

and the rental management company.

Typically, condo-hotels are upscale, fullservice developments in strong hotel markets — either popular vacation destinations or

Not Your Parents Time Shares

large cities frequented for business and leisure,

Fractional vacation homes are so last decade,

according to the hotel industry research firm

with their maintenance burdens and availabil-

Lodging Econometrics. The nation’s top mar-

ity limited to only a few weeks a year.

kets for condo-hotels are Las Vegas (represent-

Conversely, Business Week calls condo-hotels

ing 30 percent of the market), followed by

“the latest trend to hit the hospitality industry.”

Miami/Fort Lauderdale, Fla., Orlando, Fla., New York City and Chicago.

Historically, condo-hotel second homebuyers

One of the largest condo-hotel projects in the United States is Lake Buena Vista Resort

have good credit scores, assets and cash to

Village & Spa in Orlando, Fla. Located at the

spend on their vacation home.

destinations in the world, it features all of the

epicenter of one of the most popular tourist amenities of a premier resort including fine and casual dining, a signature health spa and

The concept has exploded in recent years and

designer shopping at the adjacent Factory

dominates the industry because of its tangible

Outlet Center.

advantages,” according to the National Association of Condo Hotel Owners.

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Unit owners have the option of placing their condo in the resort’s rental program and

Simply put, a condo-hotel is the fee-simple

receiving two-thirds of the rental income. The

purchase of a deeded condominium unit.

resort management company provides securi-

Owners have unlimited use, and when they’re

ty, reservations, check-in/out services, house-

not using their condo-hotel units, they can

keeping and maintenance, manages financial

make them available to hotel guests through a

duties on behalf of unit owners such as rent

rental management or leaseback program.

collection, bill payment and owner distribu-

Any revenue generated through the rental

tions, and promotes the resort on a national

program is shared between the unit owner

and international basis.

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HOT TRENDS

Closing the Deal Flourishing condo-hotel properties such as Lake Buena Vista Resort Village & Spa have more interested buyers than they have mortgage brokers to service them.

Unfortunately, the ongoing turmoil in the mortgage industry has made wholesale residential loans hard to come by.

For real estate agents looking to keep their pipelines primed with the baby boomers who are buying condo-hotel vacation properties, the next challenge is finding mortgages to finance these purchases. Unfortunately, until the residential real estate market starts to recover, the only way to do this is persistence. Get on the phone and contact every lender you can — locally, regionally and across the country — and ask them if they finance condo-hotel purchases.

Don’t be surprised if you come across lenders who are unfamiliar with the condohotel real estate sector. Be prepared to educate them. Some lenders will need to bring it up to their loan committees for discussion and others will require condo-hotel buyers to complete qualifying questionnaires.

Consider working with the condo-hotel management companies to present the concept to skeptical lenders. Historically, condohotel second homebuyers have good credit scores, assets and cash to spend on their vacation home. Most would easily qualify for a standard second home loan. In addition, when the condo-hotel is located in a popular vacation destination, owners who put their units in the rental program can get substantial income on a monthly basis.

Another option for condo-hotel mortgages is private lenders. Real estate agents who have the contacts should reach out to this arena as well. Condo-hotels are an appealing vacation home option for today’s baby boomer generation. Agents who can successfully tap this audience will be the envy of their peers.

Larry Cohen is senior vice president of Lake Buena Vista Resort Village & Spa in Orlando, Fla., one of the largest condohotel projects in the United States with 1,875 individually-owned condo-hotel units at build out and 400,000 square feet of retail space. a r e

MARCH / APRIL 2009

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101 Networking KNOWING WHAT NOT TO DO Networking can play a pivotal role in the success of real estate agents in today’s volatile housing climate.

Equally as important as knowing what to do in networking is knowing what not to do. In particular, there are three networking “don’ts” that all real estate agents should be cautious of, as they can thwart your efforts to build successful partnerships.

BY ED CRAIN AND DR. IVAN MISNER

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NETWORKING

Procrastination

also made the CPA look bad in front of their

Nothing can ruin a potentially lucrative referral

client.

partnership faster than failing to reply to a net-

What if they were raving about you to their

working partner in a timely fashion. Unfortu-

client, and then you took several days to return

nately this happens all too often. When we

the call? Now your networking partner is forced

receive a call or an e-mail from a networking

to backtrack, and tell their client to find another

partner, returning that message should immedi-

agent.

ately move to the top of your to-do list. After all,

This lack of professionalism is unlikely to

wouldn’t you respond to a message from a client

earn you any more referrals. Of course, there will

stating that they want to list their home or refi-

be times when you’re not immediately available.

nance immediately?

It’s imperative that as real estate professionals we understand that our networking partners have the potential to keep our pipelines full of

Responding to your partners promptly should always be a priority.

prospects. That’s why all partners ought to be treated with the same punctual, professional service that we provide to our clients. Failing to

If you are in a day-long seminar, you clearly won’t

respond to their message, even if they don’t

be able to respond at length to the call. But, you

have a referral to give you immediately sends a

need to at least acknowledge that you have

message that you don’t value their efforts.

received their message, and you’ll get back to

If they do have a referral for you, and you

them as soon as you have time available.

delay getting back to them, that’s even worse.

Responding to your partners promptly

For example, consider that you have forged a

should always be a priority. Never expect them

networking partnership with a CPA. Your partner

to leave a message conveying urgency. It’s up to

calls you, and you put off returning the call. By

you to recognize the potential business they can

the time you call the CPA back, they’ve had to

bring you, and treat them as your top priority.

refer the business elsewhere because the client needed to purchase a new property immediate-

Putting Quantity Before Quality

ly in order to avoid Capital Gains taxes. Not only

The second big networking no-no is placing

did you lose the opportunity, but you may have

emphasis on trying to network with as many

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NETWORKING

people as possible, instead of spending quality

partnership. That is, we have to build quality rela-

time networking with fewer people. This hap-

tionships with others, rather than just trying to

pens a lot, especially at networking functions.

amass quantities of contacts.

Many people mistakenly believe that they’ve

Instead of aiming to meet as many contacts

been successful at a networking mixer because

as possible, focus on trying to forge quality rela-

they’ve collected dozens of business cards.

tionships with just a few folks. It only takes one

While technically you are increasing your data-

quality referral partner to increase the quantity

base of contacts, and now have the contact

of business we do. But, accumulating a quantity

information for dozens of professionals, you

of contacts doesn’t mean that any of them will

haven’t really done any work. Successful net-

turn out to be quality partners.

working, true to its name, requires work.

We have to work to build trust with our part-

Exploiting the Partnership

ners, before they are likely to feel comfortable

Lastly, the single biggest no-no when it comes to

referring us to others. We have to work to earn

networking is to exploit the partnership you’ve

business, and once we’re so lucky as to receive a

forged with others. While exploiting the partner-

referral, we have to work our hardest to make

ship sounds pretty dramatic, it happens more

sure that the referral is given exceptional cus-

often than it should.

tomer service, or we run the risk of ruining the

Exploitation of the partnership can come in many forms, some of them more obvious than others. For example, you may inadvertently exploit the partnership by misleading your networking partner about your skills, talents, specialties. Even with the best intentions, if you’re not completely forthright about precisely what services you can provide, or what experience you have in certain areas, you run the risk of losing the trust your partner has in you.

For example, say a CPA partner comes to you

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NETWORKING

because their client wants to invest in commercial real estate. You’ve only closed one commercial loan in your tenure as an agent. You’re far better off telling that CPA that you’d like to refer them to someone with more commercial experience, so that the client gets expert advice, than to try and do the loan on your own, only to provide less than exceptional service.

Other ways that agents inadvertently exploit partnerships is through the sharing of partners’ information with others without obtaining their partners approval. Likewise before you begin signing up your partners for your newsletter, make sure that you have their approval.

Avoiding the exploitation of any partnerships you’ve forged through networking is actually quite easy. By being truthful and upfront with all of your partners about your experience, your skills, your goals, your objectives, you’ll never have to worry that you’re abusing the relationship.

In networking, remember that the partner-

Ed Craine is CEO of San Francisco-based Smith Craine

ships you’ve forged deserve to be valued just as

Finance. Contact Craine at (415) 406-2330 or

you value the business of your clients. By under-

ecraine@smithcraine.com. Dr. Ivan Misner is a New York

standing that there are three primary network-

Times bestselling author; founder and chairman of BNI

ing “no-no’s” to avoid, you’ll be better positioned

(www.bni.com); and founder and visionary behind the

to keep the relationship going strong for years to

Referral Institute (www.referralintstitute.com). He can be

come.

are

reached at misner@bni.com.

MARCH / APRIL 2009

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DOWN PAYMENT ASSISTANCE

(Re)Introducing PAM A proven method of helping all borrowers meet down payment requirements

BY PAUL IMURA

I

n today's economic environment, higher

cept was available previously, demand was

down payments have become more the

muted by the emergence of 100-percent LTV

norm than the exception, as lenders return

financing. To reintroduce PAM, Genworth

to tried and tested underwriting practices that

teamed with the Asian Real Estate Association

balance risk and the desire to help borrowers

of America (AREAA) and Regions Bank to

obtain financing. Those higher down payment

design the concept and to conduct third-party

requirements can, however, pose a significant

research in key markets. The results were prom-

hurdle for certain borrowers, including low- to

ising -- although more than 95 percent of con-

moderate-income and first-time homebuyers.

sumers initially were unfamiliar with the con-

As the mortgage industry has looked to the past for guidance on prudent underwriting,

cept, almost all of them expressed interest in it once they understood how it worked.

Genworth Mortgage Insurance has too. We

Our partners are equally enthusiastic about

revisited Pledged Asset Mortgages, a proven

the program. Jim Park, President of AREAA, said,

method of helping ensure that borrowers of all

“These loans play well with the Asian segment,

types not only meet down payment require-

which traditionally has used multi-generational

ments, but also feel a personal connection and

family pooling of assets to meet payment

investment in their new home.

requirements. Pledged Asset Mortgages will

The PAM (Pledged Asset Mortgage) concept is simple: in order to meet LTV require-

allow families to leverage their assets to help more than one family member.”

ments, the borrower or a family member can

Scott Dickey, Senior Vice President of

pledge CDs or cash as part of a traditional

Capital Markets for Regions sees the product as

down payment on loans with Genworth mort-

“a consumer-friendly alternative to down

gage insurance.

payment that allows consumers to maximize

For example, for loan types, markets, or

the value of their personal savings.”

property types where loan-to-value is capped

Responsible low down payment lending is

at 90 percent, pledged assets would be com-

a key component of a healthy housing market,

bined with a down payment to equal 10 per-

and the shift towards tighter underwriting

cent of the purchase price.

guidelines and requiring more money down

The pledge is typically held in trust for a

will help ensure better long-term loan perfor-

Paul Y. Imura is the US

period time depending on the size of the

mance and restore market confidence. Pledged

Product Innovation Leader

pledge and the loan amortization schedule.

Asset Mortgages provide the additional flexibil-

for Genworth Mortgage

The party making the pledge can withdraw any

ity some borrowers need to meet the new

Insurance. He manages

interest earned on the pledged assets. If the

requirements of high LTV lending. In our tough

product development

loan defaults during the pledge period, the

environment, we need to continue to explore

initiatives with key lenders

pledged assets could be forfeited to the lender

creative ways to ensure safe, affordable options

and industry partners. Paul

(just like a down payment).

for today’s homebuyers. PAM can be one of the

is also a board member of

Although the Pledged Asset Mortgage con-

first steps on the road to recovery.

MARCH / APRIL 2009

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AREAA.

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MINORITY PARTNERSHIPS

H ERE T O H ELP Wells Fargo Continues to Strengthen Minority Partnerships

BY SCOTT HOOVER

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MINORITY PARTNERSHIPS

he name Wells Fargo is synonymous

challenges that some in the Asian American

with the United States. No matter the

community may have — be it language related

era, whether it be during the gold rush,

or cultural — and that is why we have more

the roaring 20s, the Great Depression, the

than 400 Asian American associates working in

swinging 60s or today, Wells Fargo has long

our branches and mortgage offices that can

been a pillar of the U.S. financial industry.

speak many Asian American dialects and

T

Today, as the country suffers through some

understand the different cultural dynamics of

of its toughest financial times in decades, Wells

our Asian American customers. We also contin-

Fargo continues to be the backbone of the U.S.

ue to market our products in many different

financial landscape and an adherent supporter

languages and to educate our Asian American

of minority lending nationwide.

consumers in their native languages.

Reaching Out Nothing better exemplifies how Wells Fargo runs its business than its Vision and Values booklet. For more than 16 years, the company has been guided by this vision and its belief

For more than 16 years, Wells Fargo has been guided by its belief that people are its competitive advantage.

that people are its competitive advantage.

In fact, these unchanging values and timetested business diversity are, more than ever, a

One of the largest outreaches recently to

competitive advantage as the financial industry

Asian American homebuyers by Wells Fargo

evolves and consolidates.

was its first-time homebuyer educational semi-

“With our vision and values to guide us, if

nar.

we improve them every day by learning and

“We recently held a first-time homebuyers

sharing with each other, if we listen to our cus-

seminar in Chinatown in San Francisco which

tomers — then solving every problem, seizing

was conducted in Chinese,” says Blackwell. “We

every opportunity, and making every decision

had more than 500 attendees who participated

will be relatively easy,” says Brad Blackwell,

in the seminar and learned, in their native lan-

national sales manager for Wells Fargo Home

guage, what it takes to purchase a home and

Mort-gage. “We show our commitment to

become a first-time homebuyer.”

reach out to ethnic groups every day by locating our mortgage offices and bank branches in

Changing Times

diverse neighborhoods and becoming part of

As we all know, the world economy is changing.

the community.

Home prices have fallen and interest rates are

“We also show our diversity with our sales

at their lowest point in decades. However, for

force,” continues Blackwell. “We understand the

first-time homebuyers, this downturn in the

MARCH / APRIL 2009

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MINORITY PARTNERSHIPS

housing cycle is offering one of the best land-

financial needs, helping them succeed finan-

scapes to purchase in many years.

cially,” says John G. Stumpf, President and CEO

Additionally, with the opportunity is a high-

of Wells Fargo. “Our customers — external and

er level of education about loan products such

internal — are our friends. We work together

as FHA that have not been widely used by the

with them to uncover their financial needs.

Asian American homebuyer in the past.

They’re the center of everything we do. We

“We have seen a huge growth in FHA loan

make decisions from the customer’s perspec-

products over the past couple of years,” says

tive. We want them to feel a part of our team.

Blackwell. “Nationally, only 3 percent of loans

We want them to rave about our service to their

were FHA in 2006. That number grew to a little

families and friends. The greatest honor a cus-

more than 5 percent in 2007 and last year, near-

tomer can pay us is to give us more of their

ly 21 percent of home loans were FHA. What we

business.”

are seeing is a product that was underused by

Wells Fargo also is working hard to keep all

all Americans really becoming relevant again

if its customers, including Asian Americans,

and Wells Fargo is taking steps to make sure all

educated about the new, tougher, lending

homebuyers are educated about FHA loans.”

rules.

In addition, as America has become more

“The lending climate has changed,” says

diversified, Wells Fargo continues to be a leader

Blackwell. “Mortgage products are more vanilla

in reaching out to all minority groups, under-

today, more back to the basics. However, that

standing the rich cultural differences and striv-

doesn’t mean that you can’t get a loan. Our

ing to meet the complex needs of each differ-

team members are working hard to educate

ent group.

our customers about the products that are

“It really comes down to understanding the

available and to educate them that they need

needs of the community,” says Blackwell. “This is

to get pre-approved, which will offer them

not a task. This is a journey. Every journey has a

more bargaining power in the end. We also are

destination. To get to that destination, you

offering a closing guarantee that if the loan

need a vision. Ours is an ambitious one: We

doesn’t close on time, Wells Fargo will pay the

want to satisfy all of our customers’ financial

first month’s mortgage.”

needs, help them succeed financially, and be

Responsible lending is also the key to Wells

the premier provider of financial services in

Fargo’s strength and continued growth.

every one of our markets.”

According to Wells Fargo’s Web site, Wells Fargo

Which brings us back to customers — the lifeblood of Wells Fargo.

Home Mortgage and Wells Fargo Financial have five principles for responsible lending:

“We want to be known by our customers as a financial partner, for outstanding service and sound financial advice, satisfying all of their

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1. Pricing on all loans is fully disclosed and competitive, reflecting a complete view of

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MINORITY PARTNERSHIPS

the customer’s finances, credit history,

gage, or for real estate agents who know of cus-

characteristics of the transaction and

tomers that are struggling, the time to call Wells

property involved.

Fargo is now.

“In this stressed economy, we are here to

2. Wells Fargo will make enough information

help our customers stay in their homes,” he

available to the customer to encourage an

says. “Any time you or one of your clients begin

informed decision.

to struggle, you need to contact your Wells Fargo agent immediately so that they can offer

3. Points and fees are capped to maintain

a number of options to help.”

competitive loan pricing based on the consumer’s finances and credit history.

Growth Segment One of the fastest growing segments for Wells

4. Every real estate loan, made through our

Fargo is the growth being seen in ethnic com-

mortgage or consumer finance non-prime

munities. “In general, ethnic group purchase

lending channels, must provide a demon-

value is growing more than the general mar-

strable benefit to the customer or we

ket,” notes Blackwell. “We are working coast to

won’t make the loan.

coast to offer the best available services to Asian Americans and all ethnic groups.”

5. We make diligent efforts to determine that

For example, in March Wells Fargo held its

customers have a high likelihood of repay-

Second Annual CineMeeting. It is here that

ing a loan before they commit to it.

Wells Fargo invites ethnic realtors to cinemas around the country and talks about winning

“We have an excellent track record of helping our borrowers stay in their homes even when

strategies and how to be successful in today’s real estate environment.

financial difficulties arise,” says Stumpf. “Our delin-

“This is just another way that Wells Fargo is

quency and foreclosure rates are significantly

trying to educate and help Asian American and

lower than the industry average. It’s totally con-

ethnic realtors to thrive in today’s challenging

trary to our vision and values to attempt to sell a

market,” notes Blackwell. “These seminars, com-

customer any product or service that’s not in his

bined with our educational seminars to first-

or her best long-term interests. Time and again

time homebuyers and product education are

our customers tell us they recognize and appreci-

the reasons that Wells Fargo continues to be

ate the value of the service we provide them; the

the leader in the United States financial mar-

most significant way they do this is by giving us

ket.”

more of their business.”

Blackwell adds that for any customer who

Wells Fargo — here for you now and here for you in the future.

are

might be struggling with their current mort-

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SHORT SALES

Eleven Keys to Getting Your Short Sale Done!

BY CHIP CUMMINGS, CMC

L

ife is certainly tougher these days. In real

exactly who is responsible for what, what your

estate today, it is not uncommon to see

role is, and what documentation will be needed

markets with 60 percent, or more, of all

to get the lender to sign off. Here’s a look at each

transactions involving short sales or foreclosure

one:

properties. You may be seeing numbers higher or lower in your area, but one thing is for sure —

1. Situation analysis: Before you start, you

for your business to survive, you need to know

need to get a clear picture of the property’s

how to get these deals done, and get them done

current situation. Do an extensive CMA or get a

quickly.

BPO to know what value you’re dealing with —

With the new “stimulus package” and all the

especially focus on competing properties. It’s

foreclosure bailout plans underway, it would

all a numbers game. Have a real heart-to-heart

seem that there would be a standardized format

talk with the seller so that there are no miscon-

for processing these types of transactions.

ceptions about their situation — and therefore

Unfortunately, for those of you who have

no resistance to their having to walk away from

already ventured into these fresh new waters,

the property (with no cash) in order to save

you have found out that it’s more like the “wild

some time and a lot of legal headaches. After

west” out there, and in most cases — totally void

evaluating the true realistic value and condi-

of any common sense! However, those agents

tion of the subject property, as well as the out-

that do figure out the keys to structuring these

standing balance on the lien(s), you can deter-

deals, will survive — and even thrive during

mine how far under water the property is, and

these turbulent times. So what do you need to

how “short” a sale would be for the lender.

know, and what are the keys for getting everyone to the closing table?

2. Get permission: Once the homeowner is clear on your purpose, mission and dedication

The Eleven Key Steps

to helping them, you will need to obtain a

In my latest book “Cashing In on Pre-foreclo-

signed borrower authorization form prior to

sures and Short Sales” (Wiley & Sons), I put

making any contact with the lender. Trust me,

together a punch list of the key elements for

they won’t speak to you without it. Do NOT try to

getting a short sale deal done. In my interviews

impersonate the homeowner, act as an attorney

with agents from around the country, one com-

or their legal counsel in any way.

mon theme has emerged as the major roadblock to success — communication. Not just

3. Contact lender: While you can certainly get

with the lender, but with all the parties involved.

basic loan information from the lenders online

Before you undertake the process of short

system or through customer service, the real key

sale negotiations with a lender, it is critical that

to success is reaching the right person. Believe it

you understand each of the steps along the way,

or not, the Customer Service Department is

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SHORT SALES

trained to say “no,” and that they do not handle

include compelling reasons why the lender has

or negotiate short sales. They will be no help

to do a short sale, and that the alternative is

whatsoever. Somewhere in a large office build-

either foreclosure or bankruptcy.

ing, deep within the confines of some obscure office cubical, there is someone who has the

5. Get repair estimates: Obtain three separate,

knowledge — and more importantly the

detailed estimates from licensed contractors as

authority — to negotiate a short sale on behalf

to what the costs would be to bring the proper-

of the lender.

ty back up to marketable condition. If the prop-

Start out by contacting the “loss mitigation”

erty does go to foreclosure, you want to be able

or legal department, or try calling the person

to illustrate what costs the lender would have

listed on the delinquency letters from the

to incur (losses) right away just to get it on the

lender to the homeowner. Try to make initial

market. Take pictures of every aspect of the

contact while the borrower is right there — it’s

home.

6. Supporting documentation: Working with

Put together supporting documents to prove hardship and paint a crystal clear picture for the lender.

the owner, put together supporting documents to prove the hardship and paint a crystal clear picture for the lender. These should include financial statements, paycheck stubs, bank statements, tax returns, credit reports, medical bills, divorce decree, collection notices,

easier in case the lender wants to receive verbal

and so on. Again, take lots of pictures! Inside,

authorization as well. That will open the door,

outside, upside down — everything. Use any-

but you’ll still have a long walk down a dark

thing and everything that can support the fact

red-tape-filled hallway to actually get to the

that this borrower is ready to call it quits and

right person. Document every contact. Find out

will make life miserable for the lender. The

who needs to get the actual short sale package

lender doesn’t want the house back, and this

proposal, and make sure you have complete

will work in your favor.

contact information — including street address and email.

7. Purchase agreement: The next step is to negotiate with your client and the homeown-

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4. Write the hardship letter: Next, the borrow-

er, and get them to agree as to the purchase

er will have to write a detailed letter regarding

price and payoff amounts to the lender. The

his or her situation. This better be good too, as

borrower must net ZERO at the closing, or the

it has to sell the lender on the fact that there are

lender will not go along with the short sale.

no other practical options. The letter must

Make sure to include your commission in the

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SHORT SALES

calculations. The lender knows this is a cost of

need to get further approval from the end ser-

the transaction, and don’t let them short-

vicer or owner of the loan, but many specialists

change you.

are given approval authority to make the decision alone, within certain guidelines.

8. Submit the package: Once you have everything together, submit the short sale package

11. Close the deal: Once you have a green light

to the lender demonstrating that this is the

from the lender, be ready to go. The lender will

best solution for them. You MUST include a

issue an approval letter to accept a short sale

financial comparison of your proposed solution

payoff, but it will only be valid for up to 30 days

— as opposed to them having to go through a

in most circumstances. Have everybody ready

foreclosure. Don’t be overly concerned with the

to close the deal quickly.

amount of their loss, as some or all of this will probably be insured — and it’s still far less than

The Key to Success

they will lose if they have to take the property

The real key to successfully closing a short sale

back. Do NOT submit the package without a

transaction is persistence combined with

signed Purchase Agreement! Send the package

patience. Although time is short, you will run

via overnight mail.

into many brick walls along the way. It will take a lot of “no’s” to get to the right person,

9. Lender evaluation: If you’ve done your job

and require your best people skills to present

correctly, the package should read like a book,

your solution once you find that key individ-

and you’ll get prompt attention. The lender will

ual. You will be tested by otherwise seemingly

still get their own broker price opinion, and

rational people who demonstrate little com-

may come back with a counter-offer, but the

mon sense, and you’ll repeat yourself at least

numbers are what they are. Be careful — if this

1,422 times.

is a government-insured loan, then you will

You will take on the role of mother, brother,

also have to adhere to certain formulas and file

friend and personal financial advisor to a

specific forms as part of the short sale process.

homeowner that is emotionally and mentally distraught, and you’ll be unable to bill them for

10. Negotiate with lender: As they review your

the hours of psychiatric care you dispense.

package, you may go back and forth a couple of

Nonetheless, you’ll have developed a close

times on the details. Use this to develop a rap-

contact at the lending institution, have a buyer

port with the loss mitigation specialist, and help

that believes you walk on water, and earn a

them understand the totality of the situation.

commission check that might pay next month’s

They are only looking at numbers on a comput-

expense account.

er screen and a stack of files, so you need to put a “face” on the package. Sometimes they will

What a way to make a living — it’s a good thing we love what we do!

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CAPITAL TIMES: AREAA in Washington, D.C.

BY SCOTT HOOVER

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A VOICE IN WASHINGTON

When the Asian Real Estate Association of America (AREAA) formed, its mission was and remains simple and straight-forward: “AREAA is a national professional trade organization dedicated to promoting homeownership opportunities in Asian American communities by creating a powerful national voice for housing and real estate professionals that serve this dynamic market.”

n order to be considered a national voice, leaders of AREAA astutely summarized that it was vital for the organization to be represented in our nation’s capital, where so many decisions are made on a daily basis. Therefore, when the opportunity arose early in 2008 to add a chapter in the Washington D.C. metro area, the leaders of AREAA jumped at the chance.

Today, a little more than one year later membership has grown to more than 300, the chapter has established solid relationships with many of the local real estate groups and has caught the ear of some of the most powerful decision makers in D.C.

I

Capital Mission Within AREAA’s mission statement, it explains that one of the organization’s goals is to advocate for policy positions at the national level which will reduce homeownership barriers facing the Asian American community.

By establishing a chapter in the nation’s capital, the organization took a huge step in that direction. “When I first sat down with AREAA President and CEO

Jim Park, we discussed how important it was to have a chapter in the nation’s capital and how vital it would be to talk to decision makers about the goals for the organization,” says Song Hutchins, Founding Chair of the DC-Metro Chapter of AREAA. And, what the DC-Metro Chapter has done — and is doing in cities nationwide — is bringing together a very diverse group of Asian Americans under one association.

“We represent more than just one nationality. We represent a broad array of real estate, mortgage and housing-related professionals that serve the diverse Asian American market,” says Hutchins.

“AREAA is the only trade association dedicated to representing the interests of the Asian real estate market nationwide.”

Capital Numbers The Washington D.C. area (including Baltimore and northeastern Virginia), is home to nearly 400,000 Asian Americans or nearly 8 percent of the more than 5 million residents who call this part of the country home. And, although the DCMetro Chapter has been around for a lit-

MARCH / APRIL 2009

tle more than one year, it has made an immediate impact and has made a difference in the following ways:

»

By bridging the homeownership gap facing the Asian American community. The DC-Metro Chapter has been the magnet for Asian American professionals in the nation’s capital.

»

Forming allegiances and alliances with Asian communities and other communities

»

Providing a strong awareness in maintaining the highest professional standards and business ethics in conducting real estate and mortgage related business

»

Providing members and consumers resources and contributing to the success of the real estate and mortgage industries

Education The Key Hutchins believes that one of the most important aspects of AREAA and specifically, the DC-Metro Chapter is to provide

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A VOICE IN WASHINGTON

vital education to Asian American real estate and housing professionals.

“We have held a number of educational seminars to help inform and teach local professionals about today’s ever-changing housing market and keep to them up-todate on current events,” says Hutchins. “For example, we have held seminars on foreclosure, short sales and loan modification and we have been averaging between 60 and 80 attendees for each of those seminars. I believe the numbers support what we are doing and shows us that we have a group that is very interested in learning about today’s challenging market and helping to keep their clients informed.”

Since Asian Pacific Americans are among one of the fastest growing popu-

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lations in the country and because most are first generation Americans, they face significant language, cultural and knowledge barriers, which have kept the homeownership rate relatively unchanged over the past two decades. Hutchins says this is another area the DC-Metro Chapter is focusing on.

“We continue to work on getting documents in native languages and also to be able to provide translators for Asian Americans so they are able to understand the process that is taking place,” adds Hutchins. “It is a slow process but we are taking steps to bridge these challenges and address the needs of all Asian Americans.”

Developing partnerships is another

MARCH / APRIL 2009

area where the DC-Metro Chapter is working on behalf of its members.

“One of the strongest partnerships that we have formed is with the Northern Virginia Association of Realtors,” says Vinh Nguyen, President DC Metro Chapter.

“The organization has more than 11,000 members and we continue to work with them and have their support, which is very important to our growth in the community.

“We believe the DC-Metro Chapter will be the avenue to reach out and form positive alliances with all ethnicities,” continues Vinh. “Forming a strategic coalition will help promote future legislations that will serve the best interests f the commuare nity and the nation.”

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S A V E T H E D A T E

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